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Salary Survey: Are Skimpy Raises the New Normal?

With another year of anemic 3% pay increases, it sure looks that way for most IT workers.

By Stacy Collett
October 24, 2005 12:00 PM ET

Computerworld - After five years as a LAN specialist at Albany International Corp. in Albany, N.Y., a $1 billion maker of manufacturing products for the paper industry, Stephen Noisseau found himself with a 4.1% raise in 2005. Last year's raise wasn't any better. Did he complain? Grumble over his coffee? Stage a coup d'etat with other IT staffers? Nope. He looked at the situation philosophically.

"I guess that's the way the cookie crumbles," Noisseau says. "I'll take 4% over nothing. We're getting basically cost-of-living raises."

Where's the anger? The passion? The boiling point that IT employees were so close to reaching in 2004 when salaries then rose just 3%?

Perhaps repetition breeds resignation.

For the fourth year in a row, IT workers across the board received only modest raises -- their pay increased by an average of just 3% in 2005, matching last year's average salary increase, according to Computerworld's 19th Annual Salary Survey, which studied the compensation and bonuses of 14,253 IT workers. (To see results by job title and geographic region, use our interactive Smart Salary Tool. For key statistics in chart format, head to the Salary Snapshots page. There are detailed senior management, middle management and staff/entry-level results online. You can also download full results in PowerPoint format.)

IT raises still lagged slightly behind the average of about 3.2% for all U.S. workers as reported by the Bureau of Labor Statistics. While the majority of respondents (69%) said their 2004 base salary increased from one year ago, 31% experienced either no change in salary or had their pay cut.

The Good News

So here we are, another flat year. But there is some good news. Bonuses increased 2.8% in 2005, compared with 1% last year. Is that enough to keep employees happy? Apparently so, according to the survey. When asked about their overall satisfaction with their jobs, 63% of the respondents said they were either "very satisfied" or "satisfied." Only 18% expressed dissatisfaction.

Are cost-of-living-only raises the new normal? Some industry analysts say yes, at least for now. "A return to normalcy has clearly happened over the last few years," explains David Van De Voort, global leader of the IT Workforce Effectiveness group at Mercer Human Resource Consulting LLC in Chicago. The Internet bust, the subsequent slow economic recovery and the move toward outsourcing have kept salary increases low and employees relatively quiet about lackluster pay raises.

"All that special treatment that IT people were getting [before Y2k and Web-enabling] just stopped -- the high pay raises, the special bonuses," Van De Voort explains. "Many employers didn't even bother to explain it, and [employees] didn't squeal," for fear that their jobs might be outsourced to lower-paid workers. Nearly half (48%) of all respondents said that their organizations outsource work.

One project manager at a prominent East Coast financial company knows that fear. "During Y2k, the company was lucky to get any [new IT hires]. When they found somebody who knew what they were doing, they treated them with respect and made them part of the team." Now the sentiment toward IT employees has changed. "Senior management says, 'If you don't like the work, we'll get somebody in India to do it.' The computer people are seen more as part of the technology rather than part of the human resource," says the project manager, who asked not to be named.

The good news is the trend toward offshoring has slowed a bit as companies have become more aware of the quality of work and technical support they receive from overseas workers, says Van De Voort. "The whole offshoring dynamic feels a little less pressing than a year ago. But I think domestic outsourcing will continue to be a factor," he says.

Many Already Feel Well Compensated

Christina Shoppell was hired as a Web developer at Providence, R.I.-based Care New England Health System at the height of the tech boom in early 2000. She normally receives a 7% annual raise, and that's OK with her. "I started out with a great salary. The bubble hadn't burst yet," says Shoppell, who is now a senior Web developer. Other Web developers haven't fared nearly as well this year, with an average pay increase of 2.5%, according to the survey.

Increases were about the same at all levels: The average salary for a middle IT manager in 2005 is $90,691, up from $88,208 last year. Senior IT managers earn an average of $129,835, up from $126,130 in 2004.

Todd Caughey, an IT manager at Harvey Vogel Manufacturing Co. in Woodbury, Minn., saw his pay increase just 2% this year. "I know I'm pretty well in line with the industry," says the eight-year veteran. "As long as I keep up with inflation, I'm just fine. There are a lot of other factors in job satisfaction."

The worst is over for Drummond Co. in Birmingham, Ala. Over the past four years, the $800 million coal mining company decreased its budget by 20%. Now business is picking up, and IT staffers received a 3.6% pay raise. "I can't say there's anybody who doesn't want their salary to accelerate faster," says CIO John Fallis. "As a company, we've been doing very well. While salaries haven't reflected that, the bonuses have."

Fallis gave his direct reports bonuses equal to 7% to 9% of their annual pay this year. Lower-level staffers received about 5%.

The average size of bonuses reported by survey respondents this year was 2.8%, up from 1% in 2004. "As companies continue to struggle with their ability to meet employee needs within their fixed-cost budgets, they are looking to variable pay like signing bonuses, spot cash awards and project milestone awards" to reward employees, says Steven E. Gross, leader of Mercer's Employee Rewards business.

Less Stress, More Security

The major stress-inducing factors affecting IT workers all dropped slightly this year. Fewer than half of our survey takers (47%) reported that they find their jobs "stressful" or "very stressful." That's high but lower than last year's 52%. Meanwhile, 57% indicated they were "very secure" or "secure" in their jobs, up two percentage points from 2004.

"For me, the stress level is very low," says Albany International's Noisseau. "The company closed a couple of plants over the last two years. But they're done with that for the foreseeable future. I feel very secure."

Some employees say they don't mind a bigger workload, as long as it's stress-free. At Care New England Health System, the Web development workload is heavy. "There's a backlog of requests, but not so much stress because people are willing to wait," Shoppell says. "They just don't have the same expectations in the health care industry as in the corporate world," where deadlines are more difficult to maneuver, she explains.

"Pent-up demand for development work makes employees think, 'My company needs me.' They haven't been feeling that for a while," says Van De Voort.

At Drummond, budget cuts were driven by the IT department, which eliminated all of the company's mainframes, got rid of consultants and streamlined operations. "We were able to eliminate costs, upgrade technology, which employees love, and we got a bunch of new toys that we really like working with," Fallis says.

Get used to the new normal, at least for now, says Van De Voort. When it comes to salaries, "IT is like everybody else and probably will be until the economy improves," he says. "That may have been starting to happen, but we now have some general concerns on the economy with oil prices and other things.

"The IT workforce and concerns about being able to recruit IT professionals will be a leading indicator of real economic recovery, because we know that there is some pent-up need for IT work."

Collett is a Computerworld contributing writer. Contact her at stcollett@aol.com.

Read more about IT Careers in Computerworld's IT Careers Topic Center.



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